08ASTANA1158, SCENESETTER FOR CODEL HASTINGS’S VISIT TO KAZAKHSTAN FOR

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UNCLAS SECTION 01 OF 03 ASTANA 001158
SENSITIVE
SIPDIS
H PLEASE PASS TO CODEL HASTINGS
E.O. 12958: N/A
TAGS: PGOVPRELECONOSCEOVIPOTRAKZ
SUBJECT: SCENESETTER FOR CODEL HASTINGS'S VISIT TO KAZAKHSTAN FOR
THE OSCE PARLIAMENTARY ASSEMBLY
-------
Summary
-------
¶1. (SBU) Your visit to Kazakhstan for the annual session of the OSCE
Parliamentary Assembly comes at a particularly opportune time. With
its recent selection as 2010 OSCE chairman and thriving energy
sector, Kazakhstan is showing increasing confidence on the
international stage. The country is rightly proud of its
achievements: a booming economy, largely harmonious multi-ethnic
society, and rapidly expanding national capital. You will see on
arrival that the government is making preparations to celebrate
Astana's 10th anniversary as Kazakhstan's capital on July 6 (which
is also President Nazarbayev's 68th birthday) with gala festivities
that will likely be attended by Russian President Medvedev and
several other foreign heads of state.
¶2. (SBU) Kazakhstan has proven to be a reliable security partner and
a steady influence in a turbulent region. The pace of democratic
reform, however, has been slow, with political institutions, civil
society, and the independent media still underdeveloped. Our
fundamental strategic objective is a secure, democratic, and
prosperous Kazakhstan that embraces market competition and the rule
of law; continues partnering with us on the global threats of
terrorism, WMD proliferation, and narco-trafficking; and develops
its energy resources in a manner that bolsters global energy
security. We would welcome your assistance in underlining to your
Kazakhstani interlocutors the importance of:
-- following through on the democratic reform commitments Kazakhstan
made when selected to be 2010 OSCE chairman
-- adhering to Kazakhstan's OSCE obligations regarding freedom of
religion and freedom of the press
-- continuing Kazakhstan's strong support for Coalition efforts in
Afghanistan
--------------------------------------------- -----
Strong Growth, But Short- and Long-Term Challenges
--------------------------------------------- -----
¶3. (SBU) Kazakhstan is the region's economic powerhouse, with an
economy larger than that of all the other Central Asian states
combined. Economic growth averaged 9.2% a year during 2005-07, and
the percentage of the population living below the subsistence level
dropped from 28% in 2001 to under 10% at present. The energy sector
is the dominant earner, with oil exports accounting for roughly a
third of GDP. In the long term, Kazakhstan must focus on
diversifying its economy, building up non-extractive industries,
agriculture, and the service sector. In the short term, Kazakhstan
is facing duel challenges of rising inflation, propelled by soaring
international prices on food and agricultural commodities, and
reduced economic growth, a reflection of the domestic impact of the
global financial crisis. The government imposed a temporary ban on
wheat exports in April to ensure adequate domestic supply and to
keep prices down on bread. As Kazakhstan annually produces much
more wheat than it consumes, we anticipate the ban will be lifted as
early as August, once the next harvest comes in.
------------------------
An Emerging Energy Power
------------------------
¶4. (SBU) Kazakhstan exported just over 60 million tons of crude oil
in 2007 and is expected to be one of the world's top ten oil
producers soon after 2015. The country also has significant natural
gas reserves, but for now gas exports are relatively limited, in
part because gas is being reinjected to maximize crude output. U.S.
companies have significant ownership shares in each of Kazakhstan's
three major oil and gas projects: Tengiz, Kashagan, and
Karachaganak. Tengiz (with 50% Chevron and 25% ExxonMobil stakes)
recently inaugurated a second generation expansion which will
increase its crude production from 400,000 barrels per day to
540,000 later this year. Kashagan (with 16.8% ExxonMobil and 8.4%
ConocoPhilips stakes) is the largest oil field discovery since
Alaska's North Slope and perhaps the world's most technically
complex oil development project. Kashagan is expected to commence
production around 2012.
¶5. (SBU) The Kazakhstanis recognize they do not have the capability
to exploit their oil and gas resources on their own, especially
given the complexity of Kazakhstan's oil and gas projects.
Kazakhstan thus continues to welcome foreign investment in energy
exploration and production, and both the Kazakhstani government and
the international companies are committed to an enduring
relationship. That said, Kazakhstan has grown increasingly
ASTANA 00001158 002 OF 003
assertive in its energy sector in recent years, reexamining the
terms of existing contracts, driving a harder bargain with
prospective investors, and aggressively pursuing environmental and
tax claims against internationa
l oil companies.
¶6. (SBU) With major production increases on the horizon, Kazakhstan
must develop additional transport routes to bring its oil and gas to
market. Our policy is to encourage Kazakhstan to seek diverse
routes, which will ensure the country's independence from transport
monopolists. Currently, the bulk of Kazakhstan's crude oil is
exported via Russia, including through the Transneft system and the
independently-owned Caspian Pipeline Consortium (CPC) pipeline.
Near-term crude production increases are likely to flow by rail
through Russia, by tanker across the Caspian Sea to Baku, and
through the CPC pipeline, should an agreement be reached with Russia
on CPC expansion. We believe that a trans-Caspian oil pipeline must
be built to handle later production growth; however, Kazakhstan is
reluctant to openly pursue this option in the absence of an
agreement on delimitation of the Caspian Sea among the five Caspian
littoral states.
---------------------------
Democratic Development Lags
---------------------------
¶7. (SBU) While the Kazakhstani government articulates a strategic
vision of democracy, it has lagged on the implementation front.
This in part reflects the political reality that President
Nazarbayev remains extraordinarily popular, while the opposition is
weak and fractured. It also is a result of the government's
resistance to competitive political processes. In May 2007,
significant amendments were adopted to Kazakhstan's constitution
which were touted as strengthening parliament, but also removed
terms limits on Nazarbayev. In parliamentary elections held in
August 2007, Nazarbayev's Nur Otan party officially received 88
percent of the vote and took all the seats in parliament. The OSCE
election observation mission concluded that the elections did not
meet OSCE standards.
¶8. (SBU) When Kazakhstan was selected as 2010 OSCE chairman at the
November 2007 OSCE Madrid ministerial meeting, Foreign Minister
Tazhin publicly committed that his country would undertake several
democratic reforms. Specifically, he promised that by the end of
2008, Kazakhstan would amend its election and media legislation
taking into account the recommendations of the OSCE's Office of
Democratic Institutions and Human Rights (ODIHR), as well as
liberalize registration procedures for political parties and media
outlets. (Note: Tazhin also promised that Kazakhstan would support
the OSCE's "human dimension" and preserve ODIHR's mandate, including
its critical role in election observation. End Note.) The
government has thus far taken limited steps toward implementing its
"Madrid commitments," including establishing working groups, with
civil society and opposition participation, to discuss amendments to
the election and media legislation. Though much work remains, there
is sufficient time for Kazakhstan to follow through by year's end --
and we have been repeatedly reassured by the government that it will
do so. We have made clear that reneging on the commitments would
undermine Kazakhstan's effectiveness as future OSCE chair.
-----------------------------------------
Concerns on the Media and Religion Fronts
-----------------------------------------
¶9. (SBU) While Kazakhstan's diverse print media includes a plethora
of newspapers sharply critical of the government and of President
Nazarbayev personally, the broadcast media is almost exclusively in
government hands and maintains a pro-government line, with little
coverage of opposition parties. The government apparently blocked
several opposition websites in late 2007 for uploading recordings of
embarrassing conversations between senior government officials. (The
recordings were likely made by Nazarbayev's former son-in-law,
Rakhat Aliyev, who was recently convicted in absentia of plotting a
coup.) Access has not been restored to all of these sites. In
April, the English- and Kazakh-language websites of Radio Free
Europe/Radio Liberty (RFE/RL) became inaccessible to customers of
state-owned Kazakhtelecom. We raised the RFE/RL issue with senior
officials. The government did not admit to actively blocking the
RFE/RL websites, but they subsequently became accessible again in
early June.
¶10. (SBU) While Kazakhstan prides itself on its religious tolerance,
so-called "non-traditional" religious groups -- such as evangelical
Protestants, Jehovah's Witnesses, Hare Krishnas, and Scientologists
-- have faced difficulties. There has recently been a significant
increase in negative media coverage of non-traditional religions
which appears to have been orchestrated in part by the government.
The Kazakhstani parliament is currently considering a package of
ASTANA 00001158 003.2 OF 003
amendments to the country's religion law which would assert greater
government control over non-traditional groups. While the latest
draft text represents an improvement over the original version, it
retains several problematic provisions, including ones that would
create a distinction between large and small religious groups,
limiting the rights of the latter. At the urging of the U.S. and
our OSCE partners, Kazakhstan submitted the legislation for ODIHR
review. We want to ensure that Kazakhstan takes into account
ODIHR's recommendation in the final version -- as senior Kazakhstani
officials have promised us they will do.
--------------------
Afghanistan and Iraq
--------------------
¶11. (SBU) Kazakhstan is an important partner for Afghanistan's
Operation Enduring Freedom (OEF). To date, Kazakhstan has
facilitated over 4000 cost-free overflights for U.S. military
aircraft supporting OEF. Kazakhstan is also providing Afghanistan
with $2.88 million in assistance in 2008, which is being used for
food and seed aid and to construct a hospital, school, and road.
The Kazakhstanis are encouraging their private sector to seek out
investment opportunities in Afghanistan, and have indicated that
they want to make Afghanistan a focal point for their OSCE
chairmanship. In addition, Kazakhstan is the sole Central Asian
country participating in Operation Iraqi Freedom (OIF). Since
August 2003, the Kazakhstanis have maintained a military engineering
unit in Iraq which has disposed of over 4.5 million pieces of
unexploded ordnance.
-----------------------------
Non-Proliferation Cooperation
-----------------------------
¶12. (SBU) Non-proliferation cooperation has been a hallmark of our
bilateral relationship since Kazakhstan became independent and
agreed to give up the nuclear arsenal it inherited from the USSR.
Our bilateral Cooperative Threat Reduction (CTR) program has
facilitated the dismantlement of Kazakhstan's intercontinental
ballistic missile launchers, closure of test tunnels and boreholes
at the former Soviet nuclear test site in Semipalatinsk, and
elimination of an anthrax weapons production facility. Several
critical CT
R programs are ongoing, including the effort to secure
and store spent fuel from a closed plutonium production reactor, as
well as a biological threat reduction program aimed at ensuring
effective control of dangerous pathogens. In December 2007, the
U.S. and Kazakhstan agreed to extend our bilateral umbrella
agreement for the CTR program for an additional seven years.
However, the Kazakhstanis have not yet ratified the extension. In
the interim, we have faced difficulties in receiving the tax and
customs exemptions necessary for us to continue uninterrupted
implementation of the CTR program.
ORDWAY

The information recorded on this site has been extracted from http://Wikileaks.org (Kazakhstan) database..

We wish to express our gratitude to Julian Assange and his team for making this data available as it is an important public record.

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